In the transcript of the September 18 bankruptcy hearing, one of SCO's lawyers mentioned the phrase "the core of bankruptcy jurisdiction" and indicated that SCO believes that in the end it will be the Bankruptcy Court, not Utah's District Court, that should decide how much of the Sun and Microsoft money should go to Novell. Of course, Novell says Utah should finish the job it started.

I promised to translate that legal code, so to speak, about "core" into English for you, but first I had to study it myself, and I talked to some bankruptcy lawyers, to make sure I understood it. I think I do now, so here goes. Are you ready for some Anna Nicole Smith?

Believe it or not, she comes into this picture of trying to figure out what court handles what legal matters. But, first, you have to slog through some Bankruptcy Code with me, so you'll understand the more fun parts.

I want you to know that I had a boss once who wanted me to learn bankruptcy law so I could head up that wing of the business, and I refused, because I thought it was too boring. So, I'm now learning for free things I wouldn't learn for money. Go figure. But while the basics are pretty dusty and dry, and worse, complicated, I'm finding out that it's only boring for the paralegals. They do the routine paperwork. And in bankruptcy law, as you've already seen, there is an unending stream of paperwork, the same lists, over and over and over. For the lawyers, though, bankruptcy law is super interesting, because there is a lot of strategy involved and lots of ways to dance. Like any area of practice, the deeper you go into case law, the more fascinating it becomes. For those who want to taste that for themselves, buy some time on Westlaw and just dive in to keywords "bankruptcy" and "core" and "Chapter 11".

As with everything complex, you can't just start playing The Flight of the Bumblebee the first time you sit down at a piano. First you have to practice scales. It's the same here. So, let's get started with the fundamentals. And there are two fundamentals to a bankruptcy. The first fundamental is that there isn't enough money to go around, but all the creditors want to be paid even if everyone else gets stiffed. So they try, if they can, to head for the top of the list. There is more than one way to do that.

The second fundamental is: there are elaborate and somewhat squishy rules about which court gets jurisdiction over which type of matter, once there is a filed bankruptcy. Which court handles things after that, District Court or Bankruptcy Court? That is a vital question now to both SCO and Novell.

So, to get us rolling, let's begin by reviewing what the SCO lawyer said at the hearing:

MR. SPECTOR: Kimball really threw a fast ball at the head of SCO with the ruling. It was a very, very pro-Novell, anti-SCO ruling. But one thing he did not do was to grant the request for preliminary injunction. There is no incumbrance on this money. There's been no constructive trust declared on these funds. The argument - - let's be very lawyer-like. The argument is of the 25 million or so that we obtained in 2003, how much of that really relates to this off limits-type software that you thought you owned, but you didn't? Some of the stuff, of the 25 million was, by even their count, legitimately earned by SCO. So the trial was going to be to identify how much of the 25 million is, arguably, tainted money that should have been turned over in 2003. Once that's decided, whatever that number is, 10 million, 15 million, then the next question is how much of the money still in the hands of the Debtor is traceable to those, quote, "tainted funds".That, Your Honor, is the core of bankruptcy jurisdiction. What is and what is not property of the estate. We think it's going to be this, this Court's determination on that question when the rubber meets the road. We would be happy to talk about structuring a lift stay, a modification of stay motions with counsel outside the presence of the Court. We look forward to that. We knew this was coming. What we're prepared to say today, and then I'll explain, is that of course, Novell can reserve all its rights. Of course. We don't have a problem with that. But we don't think they have a right to say that we can't use, quote, "their money", when nothing has been declared finally as their money.

So, that is their intention, I gather, to transfer that issue over to the new judge by arguing that it's "core" and hence to be exclusively handled by the bankruptcy court. And I suspect they will argue next that all the money traceable to Sun and Microsoft is long gone, and all that's left in SCO's hands is money that *isn't* traceable to that money. The "tainted" money got spent long ago. All that SCO has left is "untainted". Sorry, Novell.

Neat trick. The question is, can they pull it off? If so, how? What does "core" mean in a bankruptcy court? What, in short, was he talking about?

This is so complex that it's best if we start at the beginning and work up, and I'll just explain to you what I've learned. Any bankruptcy specialists who want to add on, please do.

We have to talk about code. Not source code. Bankruptcy Code,
11 USC § 541 to be exact, because that is where we find out what goes into a bankruptcy "estate". I don't know why they call it that. Estate brings to mind money left behind by someone who died. I guess a bankrupt company in Chapter 7 could be said to have "died". But Chapter 11 means the company is only mostly dead and hoping to recover, but that is what they call it. So, here's what goes into the estate that the bankruptcy court has jurisdiction over, not the entire page of 541, which you can read for yourself, but the part that seem relevant to me:

(a) Such estate is comprised of all the following property, wherever located and by whomever held:

(1) Except as provided in subsections (b) and (c)(2) of this section, all legal or equitable interests of the debtor in property as of the commencement of the case....

That surely sounds like everything, other than the specific exceptions. All other legal or equitable interests in property. You will recall that with respect to the SVRX royalties, SCO "only has legal title and not an equitable interest in such royalties within the meaning of Section 541(d) of the Bankruptcy Code", the APA reads. And 100 percent of those SVRX monies were to be sent to Novell, Novell paying SCO 5% as a fee for doing the collecting. That means that 95% of those royalties belong to Novell from the moment they arrive in SCO's transitory hands. That isn't dependent on a Utah judge. That's the contract. And it's not in dispute. So Novell says it's their property, not SCO's to divide among the other creditors or to use to reorganize its business, and not part of the estate.

Let's look at the exceptions. (c)(2) is about trusts, but here's what *doesn't* go into the estate, according to the (b)(1) exception:

(b)(1) any power that the debtor may exercise solely for the benefit of an entity other than the debtor;

Just from that, I think you can see how that relates to Novell. So does that mean that those monies are exempt from the estate? That's Novell's argument, and you can match it up to the wording for yourself. But SCO argues that the precise amount from the Sun and Microsoft monies that were SVRX-related wasn't decided yet, and they're right. It wasn't. And since the amount wasn't decided, and that money wasn't put into a constructive trust by Judge Kimball prior to SCO filing for bankruptcy, it's now the business of the Bankruptcy Court to decide precisely how much should be given to Novell. Novell already argued that it makes more sense to let Utah finish the job it started, since it's on the eve of trial already and the district court already knows all the facts rather than start over in a new court. Novell will formally file a motion to lift the stay and get back to Utah for that determination. Some of us might cynically view it that this is the real purpose of SCO filing for bankruptcy at this precise moment in time, to escape Judge Kimball's anticipated apportionment and hope for a kinder judge or a less clueful one. And they will oppose Novell's motion and I expect to see arguments about this being a "core" bankruptcy issue coming up then.

So, might the new judge agree with SCO and take over? It gets into jurisdiction, for one thing. As we have discussed earlier on Groklaw, jurisdiction is just a legal word that means what kinds of cases each court is authorized to handle and rule on. A divorce court can't probate a will or hand down a death sentence, much as some of you might wish it could do the latter sometimes, I'm guessing. And a probate court can't give you a divorce. And if you live in New York but die on vacation in Utah, you will still have to have your will probated where you lived or, as they put it, where you were domiciled, namely in New York. You can live in lots of places. Darl wanted a second home, if you recall, but you can only have one domicile. Bankruptcy courts can't handle anything outside of their sphere of authority either, although there can be intersections between bankruptcy court and family court or bankruptcy court and district court. What is that sphere that belongs exclusively to Bankruptcy Court?

(a) Each district court may provide that any or all cases under title 11 and any or all proceedings arising under title 11 or arising in or related to a case under title 11 shall be referred to the bankruptcy judges for the district.

As you see, there is a line in the sand. If it is a Title 11, or bankruptcy, matter, then the judge in district court sends it over to bankruptcy court. And notice next that it's the bankruptcy judge who decides what is a "core proceeding" arising under title 11:

(3) The bankruptcy judge shall determine, on the judge’s own motion or on timely motion of a party, whether a proceeding is a core proceeding under this subsection or is a proceeding that is otherwise related to a case under title 11.

So the judge in bankruptcy court makes that determination. There are two choices mentioned, that it is (or isn't) a core proceeding, or that it's a proceeding *related to* the bankruptcy.
What though is a core proceeding? Of course, the section of the code defines it:

(2) Core proceedings include, but are not limited to—

(A) matters concerning the administration of the estate;
(B) allowance or disallowance of claims against the estate or exemptions from property of the estate, and estimation of claims or interests for the purposes of confirming a plan under chapter 11, 12, or 13 of title 11 but not the liquidation or estimation of contingent or unliquidated personal injury tort or wrongful death claims against the estate for purposes of distribution in a case under title 11;
(C) counterclaims by the estate against persons filing claims against the estate;
(D) orders in respect to obtaining credit;
(E) orders to turn over property of the estate;
(F) proceedings to determine, avoid, or recover preferences;
(G) motions to terminate, annul, or modify the automatic stay;
(H) proceedings to determine, avoid, or recover fraudulent conveyances;
(I) determinations as to the dischargeability of particular debts;
(J) objections to discharges;
(K) determinations of the validity, extent, or priority of liens;
(L) confirmations of plans;
(M) orders approving the use or lease of property, including the use of cash collateral;
(N) orders approving the sale of property other than property resulting from claims brought by the estate against persons who have not filed claims against the estate; and
(O) other proceedings affecting the liquidation of the assets of the estate or the adjustment of the debtor-creditor or the equity security holder relationship, except personal injury tort or wrongful death claims.

I think you can see from this list that SCO has at least a shot. Here's the problem that Judge Kimball created by trusting SCO's word that bankruptcy was not "imminent" or "inevitable" for SCO, as Novell told him it was. Because SCO denied bankruptcy was in the cards and told him they had enough funds to see the case through to the end, he left it to trial to determine the exact amount to put into the constructive trust he ordered. So, now there is an order saying there should be a trust, but no amount has been ordered put into it.

SCO, I gather, saw that as a chance to escape from the inevitability of a Kimball apportionment in Novell's favor. At least, that is how it looks to me. And here's the problem. When you get a judgment against someone, at that point, you have no priority over the other creditors, because until it's attached to some specific property, like by a lien on a house, for example, it's just an unsecured debt. But if you then get a lien, you have priority. I hear that folks do what SCO is doing quite a lot. They run to bankruptcy when there is a judgment, but before there is a lien or an order of attachment. Very frustrating. Here's a horrible case, although it came out right in the end, decided in March, where a house was at issue in a divorce. When the wife filed for divorce, the Family Court in New Hampshire issued an order that neither party could sell off any property belonging to either of them, including some jointly owned real estate in Maine. At that point, this meant that the wife had an equitable interest in the property, subject to the court's eventual decision as to who got it.

But then the husband, I gather, put the house up for sale. So the court then directed that the proceeds go into an account in the control of the parties' lawyers, with the apparent intent to protect the wife's interest, since, the court said, the husband had "violated almost every order that this Court has made" and had "concealed assets and diverted assets, and taken title to assets in the names of third parties." The husband at that time filed for bankruptcy, Chapter 7, which meant of course an automatic stay. The wife got permission to go back to family court and get her final divorce decree and get all the financial divisions established. But it also restrained any distribution of marital assets. So off she goes and the Family Court awards her the money in that escrow account. Then the wife had to go back to bankruptcy court and ask that court to let her get the assets distributed to her.

Are you starting to get the picture of how elaborate all this can be? Now it gets worse. The trustee in the bankrupcty objected. He wanted the money put into the estate. There was some back and forth on that, and the court said that the husband had no further interest in that fund. So the wife moved for summary judgment in bankruptcy court, and the trustee cross-moved, on the grounds that the transfer of the debtor's legal title to the escrow agents was a "preferential transfer" avoidable under section 547 of the Bankruptcy Code, which would cut off the wife from the husband's contingent equitable interest that the Family Court had tried to cut him off from and that piece of the funds would go to the estate. Lordy, how the wife must have been feeling at that point. Here's that section, 547, where the trustee is given the power to void a "preferential" transfer. The bankruptcy court ruled against the trustee. He appealed.

The court hearing the matter on appeal admitted that equitable interests in property is a murky area of the bankruptcy code's interpretation, so it isn't just us trying to figure this stuff out:

The Bankruptcy Code's treatment of equitable interests relating to property is a subject of great difficulty, and by coincidence another such case is also before us, Abboud v. The Ground Round, Inc. (In re Ground Round), No. 06-9002 (1st Cir.), and is decided today. The process of unraveling the Bankruptcy Code's obscurities in regard to such interests is far from over.

Of course, that's music to the ears of any lawyer desiring to stretch litigation out as long as possible. Obscurity means you get to argue this way or that and nobody knows for sure in advance. The wife in the end succeeded, but look at all she had to go through. Ah, poor Novell.

The thing is, with equitable interests such as we're talking about here in the SCO/Novell case, holding an equitable interest puts you at the head of the line of creditors. You'll remember the judge at the hearing said he wasn't prepared to rule the way Novell wanted him to *yet*, because there might be other creditors with similar claims, and if he ruled for Novell at this juncture, they'd have priority.

But there is a problem. The problem is, figuring out the precise amount. In bankruptcies, this isn't such a rare problem, I'm told. They call it tracing problems, and
where it is not clearly possible to strictly trace or follow property into an account, the unsecured creditor's committee is entitled to challenge any claim of beneficial interest in those funds. No doubt that could go on and on. Then it becomes a question of tracing or following the funds, untangling mixing of funds between trust funds and non-trust funds, and all those really interesting things that happen when it comes to tracing. There is an entire book on tracing. Well. More than one, but the one I'm told is The Book on tracing is this one by Lionel Smith.

And it gets worse, because of the complexity of what is core and what isn't in this particular litigation, because the bankruptcy court can decide to hear both core matters and those that are *related to* core matters, but notice what then happens:

(c)
(1) A bankruptcy judge may hear a proceeding that is not a core proceeding but that is otherwise related to a case under title 11. In such proceeding, the bankruptcy judge shall submit proposed findings of fact and conclusions of law to the district court, and any final order or judgment shall be entered by the district judge after considering the bankruptcy judge’s proposed findings and conclusions and after reviewing de novo those matters to which any party has timely and specifically objected.

(2) Notwithstanding the provisions of paragraph (1) of this subsection, the district court, with the consent of all the parties to the proceeding, may refer a proceeding related to a case under title 11 to a bankruptcy judge to hear and determine and to enter appropriate orders and judgments, subject to review under section 158 of this title.

The consent of all parties is out of the question, I think. But if the bankruptcy judge wants to keep this, it looks to me like he can, but whatever he rules on noncore matters will be subject to review de novo by the district court. But which district court? Utah or Delaware? Section 158 says appeals of interlocutory rulings and final judgments of the bankruptcy court go to the district court in Delaware, not Utah. But Novell told the judge in Bankruptcy Court that it is going to file a motion to lift the stay and let it go back to Utah to get matters settled there as to the amount to put in the constructive trust. Then, like the wife, they have to come back to Bankruptcy Court with that decision and try to collect.

federal courts of equity have jurisdiction to entertain
suits "in favor of creditors, legatee, and heirs" and other
claimants against a descendant's estate "to establish their
claims" so long as the federal court does not interfere with
the probate proceedings or assume general jurisdiction of
the probate or control of the property in custody of the
state court."

See how complex? Novell can get Utah to decide the figure to put into the trust, because that is just settling a claim. But money in the estate -- that's the area where the Bankruptcy Court gets into it. Which is which? And that is why Novell argued at the hearing that Kimball already knows all the facts here, and the trial is set to last only three or four days, so there is no sense to moving it all to bankruptcy court and starting over. That would take more time, and involve more expense, because you are now starting from Go again. Of course SCO would love nothing better. Judges, however, love nothing more than judicial economy. And bankruptcy judges care more about spending money than district court judges do, because bankruptcy judges are charged with handling that precise issue -- the lack of enough funds for everyone. But in a way, it seems to be the case that both courts are in this picture no matter what. And we will be covering SCO v. the World for the rest of our born days.

The district court has some options too:

(d) The district court may withdraw, in whole or in part, any case or proceeding referred under this section, on its own motion or on timely motion of any party, for cause shown. The district court shall, on timely motion of a party, so withdraw a proceeding if the court determines that resolution of the proceeding requires consideration of both title 11 and other laws of the United States regulating organizations or activities affecting interstate commerce.

(e) If the right to a jury trial applies in a proceeding that may be heard under this section by a bankruptcy judge, the bankruptcy judge may conduct the jury trial if specially designated to exercise such jurisdiction by the district court and with the express consent of all the parties.

So, what do you conclude? That there is no way to know which way the dice will roll, which court will decide this apportionment? I'm afraid that is how it looks to me too. But folks I talked to tell me there is a slight tilt in favor of district court, but after the decision is made there, then it's up to the bankruptcy court to decide whether to honor the claim.

And here's where we arrive at Anna Nicole, in Marshall v. Marshall. She was in a dispute for years over money she claimed her deceased husband meant for her to have. She filed for bankruptcy at one point, in 1996, while the will was in the process of being probated, and her husband's son by a prior wife, Pierce Marshall, stepped up to the plate and filed a proof of claim in bankruptcy court, and it became an amazing case that went eventually all the way to the Supreme Court over just the issue of which court had jurisdiction. The lower court had basically said that anything remotely related to the probate belonged exclusively in probate court, where Pierce wanted it to be. I'll let the ruling by the Supreme Court tell you about the facts of the case. The opinion, presented by Justice Ruth Bader Ginsburg, opened like this:

In Cohens v. Virginia, Chief Justice Marshall famously cautioned: "It is most true that this Court will not take jurisdiction if it should not: but it is equally true, that it must take jurisdiction, if it should . . . . We have no more right to decline the exercise of jurisdiction which is given, than to usurp that which is not given."...

Among longstanding limitations on federal jurisdiction otherwise properly exercised are the so-called "domestic relations" and "probate" exceptions. Neither is compelled by the text of the Constitution or federal statute. Both are judicially created doctrines stemming in large measure from misty understandings of English legal history.... In the years following Marshall's 1821 pronouncement, courts have sometimes lost sight of his admonition and have rendered decisions expansively interpreting the two exceptions....

Nevertheless, the Ninth Circuit in the instant case read the probate exception broadly to exclude from the federal courts' adjudicatory authority "not only direct challenges to a will or trust, but also questions which would ordinarily be decided by a probate court in determining the validity of the decedent's estate planning instrument."... The Court of Appeals further held that a State's vesting of exclusive jurisdiction over probate matters in a special court strips federal courts of jurisdiction to entertain any "probate related matter," including claims respecting "tax liability, debt, gift, [or] tort."... We hold that the Ninth Circuit had no warrant from Congress, or from decisions of this Court, for its sweeping extension of the probate exception.

I

Petitioner, Vickie Lynn Marshall (Vickie), also known as Anna Nicole Smith, is the surviving widow of J. Howard Marshall II (J. Howard). Vickie and J. Howard met in October 1991. After a courtship lasting more than two years, they were married on June 27, 1994. J. Howard died on August 4, 1995. Although he lavished gifts and significant sums of money on Vickie during their courtship and marriage, J. Howard did not include anything for Vickie in his will. According to Vickie, J. Howard intended to provide for her financial security through a gift in the form of a "catch-all" trust.

Respondent, E. Pierce Marshall (Pierce), one of J. Howard's sons, was the ultimate beneficiary of J. Howard's estate plan, which consisted of a living trust and a "pourover" will. Under the terms of the will, all of J. Howard's assets not already included in the trust were to be transferred to the trust upon his death.

Competing claims regarding J. Howard's fortune ignited proceedings in both state and federal courts. In January 1996, while J. Howard's estate was subject to ongoing proceedings in Probate Court in Harris County, Texas, Vickie filed for bankruptcy under Chapter 11 of the Bankruptcy Code, 11 U. S. C. §1101 et seq., in the United States Bankruptcy Court for the Central District of California.... In June 1996, Pierce filed a proof of claim in the federal bankruptcy proceeding ... alleging that Vickie had defamed him when, shortly after J. Howard's death, lawyers representing Vickie told members of the press that Pierce had engaged in forgery, fraud, and overreaching to gain control of his father's assets....Pierce sought a declaration that the debt he asserted in that claim was not dischargeable in bankruptcy.... Vickie answered, asserting truth as a defense. She also filed counterclaims, among them a claim that Pierce had tortiously interfered with a gift she expected....Vickie alleged that Pierce prevented the transfer of his father's intended gift to her by, among other things: effectively imprisoning J. Howard against his wishes; surrounding him with hired guards for the purpose of preventing personal contact between him and Vickie; making misrepresentations to J. Howard; and transferring property against J. Howard's expressed wishes....

Vickie's tortious interference counterclaim turned her objection to Pierce's claim into an adversary proceeding. Id., at 39; see Fed. Rule Bkrtcy. Proc. 3007. In that proceeding, the Bankruptcy Court granted summary judgment in favor of Vickie on Pierce's claim and, after a trial on the merits, entered judgment for Vickie on her tortious interference counterclaim.... The Bankruptcy Court also held that both Vickie's objection to Pierce's claim and Vickie's counterclaim qualified as "core proceedings" under 28 U. S. C. §157, which meant that the court had authority to enter a final judgment disposing of those claims....The court awarded Vickie compensatory damages of more than $449 million--less whatever she recovered in the ongoing probate action in Texas--as well as $25 million in punitive damages. Id., at 40.

Pierce filed a post-trial motion to dismiss for lack of subject-matter jurisdiction, asserting that Vickie's tortious interference claim could be tried only in the Texas probate proceedings.... The Bankruptcy Court held that "the 'probate exception' argument was waived" because it was not timely raised. Id., at 39. Relying on this Court's decision in Markham, the court observed that a federal court has jurisdiction to "adjudicate rights in probate property, so long as its final judgment does not undertake to interfere with the state court's possession of the property."...

Meanwhile, in the Texas Probate Court, Pierce sought a declaration that the living trust and his father's will were valid.... Vickie, in turn, challenged the validity of the will and filed a tortious interference claim against Pierce, ... but voluntarily dismissed both claims once the Bankruptcy Court entered its judgment.... Following a jury trial, the Probate Court declared the living trust and J. Howard's will valid. ...

Back in the federal forum, Pierce sought district-court review of the Bankruptcy Court's judgment. While rejecting the Bankruptcy Court's determination that Pierce had forfeited any argument based on the probate exception, the District Court held that the exception did not reach Vickie's claim.... The Bankruptcy Court "did not assert jurisdiction generally over the probate proceedings ... or take control over [the] estate's assets," the District Court observed, ... "[t]hus, the probate exception would bar federal jurisdiction over Vickie's counterclaim only if such jurisdiction would 'interfere' with the probate proceedings," ibid. (quoting Markham, 326 U. S., at 494). Federal jurisdiction would not "interfere" with the probate proceedings, the District Court concluded, because: (1) success on Vickie's counterclaim did not necessitate any declaration that J. Howard's will was invalid ... and (2) under Texas law, probate courts do not have exclusive jurisdiction to entertain claims of the kind asserted in Vickie's counterclaim, id., at 622-625.

The District Court also held that Vickie's claim did not qualify as a "core proceedin[g] arising under title 11, or arising in a case under title 11." 28 U. S. C. §157(b)(1).... A bankruptcy court may exercise plenary power only over "core proceedings." See §157(b)-(c). In non-core matters, a bankruptcy court may not enter final judgment; it has authority to issue only proposed findings of fact and conclusions of law, which are reviewed de novo by the district court. See §157(c)(1). Accordingly, the District Court treated the Bankruptcy Court's judgment as "proposed[,] rather than final," and undertook a "comprehensive, complete, and independent review of" the Bankruptcy Court's determinations....

Adopting and supplementing the Bankruptcy Court's findings, the District Court determined that Pierce had tortiously interfered with Vickie's expectancy. Specifically, the District Court found that J. Howard directed his lawyers to prepare an inter vivos trust for Vickie consisting of half the appreciation of his assets from the date of their marriage.... It further found that Pierce conspired to suppress or destroy the trust instrument and to strip J. Howard of his assets by backdating, altering, and otherwise falsifying documents, arranging for surveillance of J. Howard and Vickie, and presenting documents to J. Howard under false pretenses.... Based on these findings, the District Court awarded Vickie some $44.3 million in compensatory damages....In addition, finding "overwhelming" evidence of Pierce's "willfulness, maliciousness, and fraud," the District Court awarded an equal amount in punitive damages....

The Court of Appeals for the Ninth Circuit reversed. The appeals court recognized that Vickie's claim "does not involve the administration of an estate, the probate of a will, or any other purely probate matter." ... Nevertheless, the court held that the probate exception bars federal jurisdiction in this case. In the Ninth Circuit's view, a claim falls within the probate exception if it raises "questions which would ordinarily be decided by a probate court in determining the validity of the decedent's estate planning instrument," whether those questions involve "fraud, undue influence[, or] tortious interference with the testator's intent." Ibid.

The Ninth Circuit was also of the view that state-court delineation of a probate court's exclusive adjudicatory authority could control federal subject-matter jurisdiction. In this regard, the Court of Appeals stated: "Where a state has relegated jurisdiction over probate matters to a special court and [the] state's trial courts of general jurisdiction do not have jurisdiction to hear probate matters, then federal courts also lack jurisdiction over probate matters."... Noting that "[t]he [P]robate [C]ourt ruled it had exclusive jurisdiction over all of Vickie['s] claims," the Ninth Circuit held that "ruling ... binding on the United States [D]istrict [C]ourt."...

We granted certiorari ... to resolve the apparent confusion among federal courts concerning the scope of the probate exception. Satisfied that the instant case does not fall within the ambit of the narrow exception recognized by our decisions, we reverse the Ninth Circuit's judgment.

In other words, what SCO wants it may not get. Just because Congress sets up a court to hear a certain type of matter doesn't mean that the district courts, like Utah, are aced out of the picture as broadly as I think SCO wishes. In the Marshall case, the court explicitly said that a probate court doesn't suck up every dispute remotely related to the probate. Anna's tort claim was appropriately heard in federal court, not the probate court:

At issue here, however, is not the Texas Probate Court's jurisdiction, but the federal courts' jurisdiction to entertain Vickie's tortious interference claim. Under our federal system, Texas cannot render its probate courts exclusively competent to entertain a claim of that genre. We therefore hold that the District Court properly
asserted jurisdiction over Vickie's counterclaim against Pierce.

After determining that Vickie's claim was not a "core proceeding," the District Court reviewed the case de novo and entered its final judgment on March 7, 2002....The Texas Probate Court's judgment became final on February 11, 2002, nearly one month earlier....The Court of Appeals considered only the issue of federal subject-matter jurisdiction. It did not address the question whether Vickie's claim was "core"; nor did it address Pierce's arguments concerning claim and issue preclusion....These issues remain open for consideration on remand.

* * *

For the reasons stated, the judgment of the Court of Appeals for the Ninth Circuit is reversed, and the case is remanded for further proceedings consistent with this opinion.

The Marshall v. Marshall case is still going on, despite Anna Nicole's death, because her daughter has an interest, and all the Supreme Court decided was where the claim would be heard. It took ten years after Anna Nicole filed for bankruptcy to get just that one part of the dispute settled. If you have money, I gather you can litigate not only for your entire life, but even after your death.

A distinction is made between core and non-core issues in applying the exception to the
FAA. “[I]f the court determines that a proceeding does not derive exclusively from the Code, the
court has no choice but to abstain and allow the parties to arbitrate the matter.” ... The Trustee has brought some claims that are not exclusive to the Code. For this
reason, the Court has no discretion to refuse enforcement of an arbitration agreement for the
Trustee’s non-core claims of professional negligence, negligent misrepresentation, breach of
fiduciary duty, and participation in breach of fiduciary duty....In the present action, the Trustee’s core claims concern turnover,
avoidance of fraudulent transfers, and avoidance and recovery of preferential transfers....

The Court reaches this conclusion, in part, after considering the issue of insolvency which
will be presented in the numerous avoidance actions in this court and the policy of preventing
piecemeal litigation....Conflicts can
be expected if these decisions are rendered in different forums at different times.... This Court regularly rules upon preferences and fraudulent transfer complaints.
The bankruptcy court is well qualified to address the instant core claims. This Court’s docket can
accommodate an expeditious trial schedule for the turnover, preference, and fraudulent transfer
claims. The determination of these claims expeditiously is in the interest of the estate and
implements the plan. The determination of all turnover, preference, and fraudulent transfer claims
by a single decision maker avoids inconsistent results....

IV.
CONCLUSION

The Court is allowed no discretion as to non-core claims.

More on point, here's a very helpful site, Morris & James'
Delaware Business Bankruptcy Report (note all the resources on the menu on the left), that explains some Delaware cases and what core/noncore means:

As the Court noted, the Third Circuit test for a determination of core or non-core status first requires an examination into whether the matter fits within one of the categories of core proceedings provided at 28 U.S.C. § 157(b)(2). If it does not, the court must apply the following test set forth in Halper v. Halper, 164 F.3d 830, 836 (3d Cir. 1999):

“’a proceeding is core [1] if it invokes a substantive right provided by title 11 or

[2] if it is a proceeding, that by its nature, could arise only in the context of a bankruptcy case.’”

Also, in Northern Pipeline Constr. Co. v. Marathon Pipe Line Co., 458 U.S. 50, 71 (1982), the United States Supreme Court held that bankruptcy courts are constitutionally restricted when it comes to adjudication of pre-petition state law claims, but that there is no such impediment to deciding post-petition state law causes of action. Such post-petition actions are typically core. The court also noted that some courts assess whether the claim may bring an economic benefit to the estate. If there is an economic benefit to the estate, then that may support the exercise of related-to jurisdiction over a non-core claim under 28 U.S.C. § 157(a); however that is a separate inquiry from the core/non-core one.

Century argued that the adversary proceeding was non-core because (i) no substantive rights under the Bankruptcy Code were involved; (ii) the proceedings could have existed outside the bankruptcy case; and (iii) the claims arose pre-petition.

Argh. Enough bankruptcy. But hopefully we now at least know what the parties are talking about when they talk about core and noncore, and if you go back and read now what SCO said to the Bankruptcy Court, quoted above, hopefully it will all fall into place for you.

Judging from the Marshall case, if SCO is absolutely determined to press on and on, we will have plenty of time to learn not just the overview but all the fine points too.